What is AML?

Its Purpose Anti-Money Laundering (AML) is a concept primarily used in the financial and legal industries.

The purpose of AML is to target criminal activities, including market manipulation, trading illegal goods, drug trafficking, corruption, and tax evasion. AML is closely complemented by the “Know Your Customer” (KYC) procedure, since verifying the identity of customers is an integral part of financial regulation.

Why Platforms Must Follow AML/KYC?

Over the years, new AML/KYC laws and requirements have been established. One such law is the Money Laundering Act (1994), which states that every Money Services Business (MSB) must be registered by its owner or controlling person.

MSBs include anyone who deals with:

Currency

Check cashing

Issuing or cashing traveler’s checks/money transfers

Therefore, a cryptocurrency platform dealing with fiat currencies must adhere to strict AML/KYC policies. If the platform supports card payments and bank transfers, it must verify each customer to ensure they are not involved in illegal activities.

The reason cryptocurrency platforms must adhere to AML/KYC rules is the anonymous nature of cryptocurrencies.

Cryptocurrency transactions are very attractive to those who want to conceal income or transfer it while remaining anonymous. Before the implementation of AML/KYC policies, it was practically impossible to trace the sender and recipient of cryptocurrency transactions. That’s why the European Union’s anti-money laundering and counter-terrorism financing regulations require all types of cryptocurrency platforms to adhere to the 5th Anti-Money Laundering Directive.

The 5th Anti-Money Laundering Directive

In 1990, the European Union adopted its first Anti-Money Laundering Directive. The 5th Anti-Money Laundering Directive (5AMLD) was adopted on May 30, 2018. It was created to address potential gaps in EU regulations concerning anti-money laundering (AML) and counter-terrorism financing (CFT).

The goal of 5AMLD:

Prevent the unlawful use of the financial system for money laundering.

5AMLD requires organizations to apply customer due diligence requirements when entering into business relationships (i.e., identify and verify the identity of customers, monitor transactions, and report suspicious transactions).

Legislation is continuously reviewed to reduce the risks associated with money laundering and terrorism financing.

Under 5AMLD:

Cryptocurrency exchanges are now considered “obliged entities” and must comply with AML/CFT requirements, including reporting suspicious activities and conducting proper customer due diligence (CDD).

The legal definition of cryptocurrency can be seen as a “digital representation of value that can be transmitted, stored, and traded digitally.”

Financial Intelligence Units (FIUs) are allowed to obtain addresses and names of virtual currency owners.

Cryptocurrency exchange providers and wallets must now be registered with competent authorities in their jurisdictions.

How KYC Verification Works: Example from WhiteBIT

Thanks to WhiteBIT’s verification process, you can quickly apply your data and documents. The process takes only a few minutes and doesn’t require any technical skills. As usual, the process takes place on the exchange.

WhiteBIT’s steps to ensure high levels of user security:

1) WhiteBIT stores 96% of users’ digital assets in multi-signature cold wallets.2) The platform has an insurance fund replenished by transaction fees.3) User accounts are protected by anti-phishing programs.4) The exchange supports two-factor authentication and uses a Web Application Firewall (WAF) to protect against network attacks.5) WhiteBIT complies with the standards of the Financial Action Task Force (FATF).6) The exchange automatically analyzes the addresses from which clients make deposits in accordance with AML procedures. Users are also provided with the opportunity to independently check cryptocurrency addresses on the platform’s website for involvement in illegal activities.7) The exchange undergoes regular audits by Hacken, which ranks it among the top exchanges for security with a AAA rating.

Here are the instructions:

What is this 2FA?
2FA, or two-factor authentication, is a code generated by an application that ensures you are the only person with access to your account.

It’s entirely possible that your documents may not be approved. But don’t take it to heart. The exchange allows you to try again if your information was rejected.

You can undergo identity verification on your device if you prefer to use only your phone. It’s as simple as being online. You just need to register on the exchange through the app and submit an application for identity verification. Follow the same instructions.

Conclusion

(AML) plays a crucial role in combating criminal activities, including market manipulation, illegal trade, drug trafficking, corruption, and tax evasion. AML is closely associated with “Know Your Customer” (KYC).

One of the main reasons why cryptocurrency platforms must adhere to AML/KYC rules is the anonymous nature of cryptocurrencies. The Fifth Anti-Money Laundering Directive (5AMLD), which was adopted on May 30, 2018, aims to address potential gaps in regulations related to anti-money laundering (AML) and countering the financing of terrorism (CFT).

The KYC process simplifies identity verification, allowing users to conveniently apply their data and documents. Typically, this process takes only a few minutes and doesn’t require any technical knowledge.

#kyc #aml #security #exchange #deniztutku

False identification documents generated by artificial intelligence are now passing through Know Your Customer (KYC) checks on several cryptocurrency exchanges. This new development raises concerns that it could provide hackers and fraudsters with a new advantage in the realm of cybercrime. These false identification documents are readily available for as little as $15, increasing the risk of their misuse.
Artificial Intelligence and Fake Document Generators
A new service utilizing "neural networks" and "generators" of artificial intelligence can create realistic fake driver's licenses and passports from 26 different countries, including the United States, Canada, the United Kingdom, Australia, and several European Union member states. What's even more alarming is that this service accepts payments in various cryptocurrencies through the commercial payment service Coinbase.
How Does It Work?
A report from 404 Media, dated February 5th, details a case where individuals successfully circumvented the KYC verification process of the cryptocurrency exchange OKX. How did they do it? Simply by uploading a photograph of a British passport generated by this new service. The resulting photograph appeared as if the ID card was placed on a bedsheet, creating the illusion of a recently taken picture.

Widespread Usage Across Various Platforms
A Telegram channel, showcases numerous examples of individuals who have successfully used these false identification documents to bypass verification on various cryptocurrency exchanges and financial services. Among these platforms are exchanges like Kraken, Bybit, Bitget, Huobi, and even PayPal.

Potential Risk for Crypto Fraudsters and Hackers
This new service could pose a significant challenge for crypto fraudsters and hackers. They could use it to create false identities and subsequently open accounts on cryptocurrency exchanges and banks, concealing their true identities and complicating their detection. This could lead to further complications for authorities monitoring crypto transactions.
Responses from Exchanges and Companies
As the report notes, cryptocurrency exchanges such as Binance, Kraken, Bybit, Bitget, Revolut, Huobi, and PayPal have not yet provided any comments regarding these claims of circumventing their identity checks. It is possible that they will need to take steps to strengthen their KYC processes to safeguard the security of their platforms and users against this new risk.
#ai #crypto #kyc
 
 
Notice:
,,The information and views presented in this article are intended solely for educational purposes and should not be taken as investment advice in any situation. The content of these pages should not be regarded as financial, investment, or any other form of advice. We caution that investing in cryptocurrencies can be risky and may lead to financial losses.“
 
 

 

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One of my favourite memories with cryptocurrencies was when I just started my journey. What I engaged in was arbitrage and otc-p2p, even though I did not know it had a name. I would buy #BTC from a vendor and send to a local exchange to sell. I made quick bucks from it so I continued the whole process because it made me money. Unfortunately, I did not know anything about #kyc and trading limits or account types, so I traded up to my account limit and could no longer use the exchange anymore. It happened that I had just deposited BTC and was about to withdraw it in fiat when I noticed an "err:" message saying I had reached my limit and needed to do KYC. Luckily I was able to withdraw it in BTC form, and it marked my end with that exchange.

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